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House Price Crash Forum

plummet expert

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  1. It's pure spin on the truth. The level of lending has fallen back from the last quarter of 2009 quite substantially, while more property has come on the market. It is the last breathless puff of a reinflated bubble full of printed and borrowed govt money. The increase is claimed in relation the same quarter a year ago, so no surprise it has gone up. A fewmonths from now......anyones guess, but the balloon will pop as rates rise and we face up to our real debts after the election.
  2. I agree that the deficit is totally unsustainable. We cannot reach a national debt of £1.3 TRILLION in four years time and still have structuarl deficit of about £85 BILLION PA! That is what Brown and Darling say is their plan. Not one of the other parties is prepared to tackle this point convincingly because, they are scared that they will be accused of wanting to put UK back into recession. Brown has printed and borrowed it partly away. He has gone too far, but no one dares to say so and still they queue up offering spending pledges wanting your vote. Unfortunately or even fortunately, the money markets will not let us borrow £1.3 Trillion as we cannot possibly service it or pay it back. It would cost (Darling's figs) £73 BILLLION PA to service interest on that national debt. With a huge structural deficit aswell, it just won't work. We do need to cut spending fairly substantially and now. It will be cheaper to get this sorted out now than arrive at borrowing which is unsustainable and be forced into it with rates much higher. We should certainly make it easier for business where possible as they will provide jobs and taxes, relieving the govt of spending. The public sector has grown by 600,000 jobs since 1997. This is far too many and we cannot afford it and all the pension liability. It means that the public sector forms 51-2% of the economy instead of 37% which was the position in 1997. No wonder the govt has a huge and gaping hole in its finances. This was happening before the financial crisis and has made matters so much worse than they need have been. Mr Brown will be judged one of the most profligate and worst chancellors in history and now a PM in the same vein. I thought so years ago and can't seem to change my mind. Mmmmmh
  3. House prices have never in the history of any boom ever failed to return to the trend line of about 3.5 x incomes. So don't lose faith. When they fall without giant piles of borrowed and printed money (a 25 yr debt in itself a la Brown) caused by govt intervention then they often go below the trend line - like 1995. Then they were down to 2.5 x incomes. This will happen when the govt finds it can't borrow anymore (quite soon) and like Greece it has to make deep cuts. Inflation is rising against the expectation of some and will carry on, with rates following gradually. The madness has temporarily been to reinflate the house price bubble at huge public expense for the future to try and win an election. Remember £300 BN will be unavailable to lenders to prop it up from next year when the false support to lenders stops. The money markets are already feeling very ill about UK prospects and awaiting the election result. If no sensible budget is in place soon, there will be a run on the pound, failure to actually sell GILTS and off to the IMF, budget cuts enforced on us. Then house prices will fall even harder even if we get inflation. Rates can only go up! It is not realistic to say that an ordinary 3 bed semi is about 10 times an average persons income where I live in Sussex. 7 in some places and apparently 11 in Bournemouth! 'Never in the history of house prices has so much been owed by so many to so few banks on so high an income multiple'
  4. Soros could be short and long on the Euro! He will probably think, so long as there is uncertainty about who is to pay for the greek mess then the Euro will be weak and that is now. Then, when it is found only the Greeks can pay it off and no one else wants to (even if the IMF or ECB are involved) the Euro will rise. It will rise upon the acceptance that Greece is bust, must make dramatic budget cuts and have the recession borrowed money pretends you don't ever need.
  5. Peter Schiff just talks straight and gets it right. He called the current crisis about 2 years before and was booed off Bloomberg TV by the 'ever ever' rigade. We need him here as PM I think. Fact is he believes, as I do, that putting off market corrections with vast borrowing is a great mistake. It will cost more than having a deeper recession. Yes, yes I know we need banks....but there were other ways to have them than just sinking a eneration worth of National debt into a black hole. But remember it was Greenspan in the US ho orchestrated a very low interest rate era and encouraged a property bubble. Schiff has been having a go at him lately and Greeenspan has been in the media making limp excuses. He and the derivative mess are what did it! Japan has been doing QE for 20 years and also borrowing ludicrous amounts - up to 200% GDP soon. The only reason they have not sunk is their people have bought a very high proportion of their own govts debt internally. Worth noting their property has ben going down for about 20 years too. The crash here has been expensivley postponed, but it will arrive just when no one thinks it could possibly happen anymore. Rates will rise under the burden of our out of control debt and inflation and stagflation will be back before long. It is all a false dawn and when the election is over the markets won't wait long before they start to have the correction in some form anyway, be it currency crisis, national debt rates rising, or refusal to buy GILTS.
  6. The bubble is being steadily blown up again now, which is 'correcting' the property price crash which began 2 years ago. All this means, is that the 'evil day of reckoning' has been put back a while. Unfortunately the cost of this is borrowed money - yours and all other tax payers. This false argument that somehow we cannot cut expenditure, which is at levels that are plainly unsustainable and mad as a hatter, is nonsense. We will cut it whoever is in power, or otherwise the money market will make us by refusing to lend, or making interst rates prohibitive, or having an almighty currency crash, or even a combination. The Govt's own estimate of the cost of interest on the national debt in four years time at present borrowing (AND EVEN CUTTING TO HALF THE ANNUAL DEFICIT) is £73 BILLION PA. That's without the structuarl annual deficit, allegedly to be about £85 BILLION by then AND WITHOUT paying a penny of the capital back. The UK cannot afford it. It is much more in real terms than we owed in 1976 when Labour had to go the IMF as the money market dried up. Current tax take is only £460 BN. gOVT spending is £630 BN ish. Four years from now it would be much worse than the Greece situation. Let's get real. Interest rates can go only one way. Inflation will rise. We can't go on as it is and no party has the guts to say so for fear of losing your vote. In fact we need to get on with what should have happened and did in the USA in the property market. It has not happened here mainly because so many of us have variable and tracker mortgages it has falsely propped up the market. The long term trend is that properties are 3 to 3.5 times the annual income (not 5.5 as one article reports on this site - historical charts show this) - we are currently at average property price 7 x and apparently rising, only on the basis of unrealistically low rates. Not clever lending or clever borrowing. Knock on a hundred peoples doors and ask them if they could actually afford to buy their own house with their current income and a 10% deposit. Might be surprised how many couldn't. But they are in the false market aren't they. Like me - can't see how my house should be worth four times what I paid 13 years ago, when wages have risen only 80% in that period. By the way, I could not buy my house again if put back to square one, so to speak. Something wrong there! The crash, when it comes will now be worse and cost more sadly.
  7. What strikes me as strange is that neither the Tories nor the LibDems are questioning whether the idea of simply cutting the annual deficit by half over 4 years is enough. By then we are told the National Debt will have reached an unmanageable £1.3 Trillion. Doubt if we could pay for the interest on that, carry on nursing the (by then half £85Bn) current annual deficit AND make capital repayments. Let's see...over 10 years with capital repayment @ 5%.... with higher rates to follow because of a currency crisis and run to the IMF - this all adds up to about a debt spend of around £280-300 Billion pa. I suppose it could be less with a bit of growth and a bit of luck. But still the total tax take is only £450 Billion pa currently. No, sorry...can't work it out. Will just have to change my name to Darling and apply for a loan to see me through.
  8. It all depends very much on whether the govt, Con or Lab actually do anything substantial to cut the deficit. Not sure either have much of a grip on it. We, the voters always vote for the lie we like best and then complain about it when diapoointed afterwards. The extraordinary thing is that it has been apparently accepted that we only need cut the deficit in half within 4 years. That would mean a gaping hole of 80-90 billion pounds pa still unfunded by taxes! That is not supportable and is very unlikely to be affordable just from paltry growth. We may well find that once Greece has given in and is under the IMF with greater spending cuts to perform, then the markets will turn on us if we do not produce a credible plan for cuts. Then, the money markets will not buy our IOU's (GILTS) and the interest rate to borrow will rise like in Greece where its now 4% more than ours and rising. Might even have collapsed auctions of gilts, so govt with no money like in 1976. That is BANKRUPT. What did we do then? Cut public spending rapidly and have lots of strikes. The economy improved - OH and we are told if we cut spending now, it won't improve and will destroy the recovery. Ahhmmmm - it's the spending which is holding back the private sector from recovering because the public sector supported by it is too big. We cannot afford Brown's increased army of public servants - 600,000 more than 1997, all with pension entitlements. We had hospitals and schools in 1997, so now you know it's a shambles and unemployment is really much higher, just masked by overspending, pulling down the private sector who actually pay for it all through taxes. As Brown caused a high deficit BEFORE the financial crisis began and wasted billions on his expansion of the public sector, he cannot be the one to put it right. In fact many economists I know privately think Brown to be the worst chancellor of modern times.
  9. If you are 'stalking' a property that has been hanging around for a while, it is worth looking on www.propertysnake.co.uk . Here you can punch in the postcode and find out when most homes were first put on for sale, how much and when they were taken off and on again and at what price - you get the picture! EA's always have their adverts say 'New!' when in some cases they have been on and off the market, even for years. Try it if you haven't and you might be surprised.
  10. The US debt including all the unfunded, not mentioned liabilities, is very little different to the UK. Japan has a published borrowing of over 200% GDP - much more than the admitted amounts published by the US and UK. How do the Japanese manage it? The interest must be crippling. None of the current crisis has been allowed to unravel properly (or deleverage, if you prefer) so the Western Govts ARE ALL trumpeting some form of vague recovery and patting themselves on the back. But it's the result of such enormous borrowing that it could all change very rapidly and go wrong. If you can interminably inflate your country out of recession by printing and borrowing money, why have we ever had a recession? There is a natural business cycle and there will always be a boom and bust. The more a govt borrows, then the amount of growth the economy receives recedes per pound or dollar. We are about to find this truth out again. If you inflate the bust to get away from it, you are just moving the problem to a different time scale and it may be worse when it returns.
  11. Don't worry. Inflation is in the system and interest rates will rise gradually. When that happens and keeps on happening, the property market will fail. At the moment the burst bubble has been filled with hot air by the govt. If they allow this 'recovery' and continue to support it, then the bust will be even harsher in the future. People's incomes cannot justify present prices. If you knocked on a hundred home owner's front doors and asked if they could afford to buy their own house with a 10% deposit on their current income, you would find a large number could not. If incomes rise 80% from 1996 to now and house prices rise about 300 to 350% there must be a problem. The SE is worst on these measures. There has been no time in history when the house price to income ratio has not returned to 3x (and below in or after recession). The graph produced by Nationwide is interesting but does look at prices against income, just their own trend line. Not the same.
  12. Hey, someone sensible has written the truth of it all. The austerity referred to is certainly on the way and will not be avoided by printing money and pretending we can therefore grow our way out of debt. If it was that easy, no country need ever worry about recessions or depressions ever again. 'No more boom and bust' some fool said I think. Markets rise and markets crash eventually. Any fool knows that the Keynesian way of just pouring money into an economy is faced with the law of diminishing returns. The UK HAD A STRUCTURAL DEFICIT WHICH WAS TOO HIGH BEFORE THE CREDIT CRUNCH. In plain language, Brown overspent already as Chancellor for many years and has made the problems far worse than necessary. In fact most of the western world have done the same to some extent. Only Australia were paying off their national debt while everyone else carried on borrowing (even calling it investment !) like drunks at a party. It is only a matter of time before it all catches up with us. Perhaps then we will be faced with reasonable house prices and our children can think of buying one?
  13. You are right. You are in good company because it's true almost everywhere. You cannot afford what your parents had because something has gone wrong. House prices should only be measured against incomes and all this 'affordability' relating to current interest rates is nonsense. At the moment, looking at incomes, the UK is the 3rd Most expensive housing in the world. It has been leveraged up since 1995 by lower than realistic interest rates and a loose lending policy (like borrowing up to 6 times income). If you could not have borrowed so easily, it would not have happened . Simple. The most expensive housing in the world on this basis is currently Australia and then New Zealand for the same reason. One day it will all end in tears. Here you won't have long to wait. Tears will start by the end of this year and carry on for several years as prices relative to income will fall. Interest rates will be forced up in the markets whatever the BOE does and it will stall the housing market as inflation induced by borrowing/money supply/money printing, will rise. It may arise through commodities rising in price whether or not the CPI wants to tell you this. There is no other reason why a few bricks on a small piece of land should be £100's of K. It only costs about £50k to build a normal semi and about £80-90k to build a good size 4 bedder. The rest is the land price!
  14. Jim Rogers will be proved right. It's no joke. I saw him on Friday and he is right to think the pound will sink. The Euro cannot withstand bail outs of Greece or any other nation either. The pound will suffer and is already falling even against the US dollar. The Euro may even break apart over all the problems with Greece. What about Spain or Portugal or Ireland all of which cannot pay their debts. In fact we cannot pay ours and it will come home to roost soon. The idea that we should wait for 'growth to be entrenched' before we cut our insupportable spending is rubbish. The bill cannot be paid and the real recession is coming whether we like it or not. The current over spending throughout the west will and is leading to a move of wealth to the East. Hard assets will rise. Short term the US dollar will go up, but end of year it fall hard. The 'it's all alright now' feeling is very misguided. Printing money and borrowing cannot prevent a necessary deleveraging. All that has happened is that private debt has been taken over by govts around the world. The bad debts cannot be paid back! Read Martin Hutchinson, or Peter Schiff or Dr Marc Faber.
  15. I would not buy at the present time. The kettle is beginning to boil and the debts are not supportable. Unless you are buying for cash and therefore getting virtually nothing on your waiting money then it's better to wait. Within 18 months you will see interest rates rising inexorably and prices crumbling gently for several years. Good luck, but remember if you go ahead, divorcing couples can be a pain to buy from as they may have another argument and don't care about you as they pull the plug.
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